Playtex, Hovnanian bonds gain, Dura subs dive; Can West Media prices eight-year deal

By Paul Deckelman and Paul A. Harris

New York, July 13 - Think of the never-tiring Energizer Bunny slathering on some Banana Boat sunscreen so he can work on his tan at the same time he's beating his drum - he's already got the cool shades on - and you get a pretty good picture of the financial world's major merger and acquisition event Friday. Leading battery maker Energizer Holdings Inc. agreed to acquire Banana Boat's parent company, Westport, Conn.-based personal care manufacturer Playtex Products Inc., for $1.16 billion. Playtex's bonds, which will be tendered for as part of the deal, were seen up solidly on the news.

Also rising were the bonds of Red Bank, N.J.-based homebuilder Hovnanian Enterprises Inc., along with the company's shares, given a boost by speculation that billionaire investment guru Warren Buffet's Berkshire Hathaway Inc. may buy an equity stake in Hovnanian.

On the downside, Energizer rival Spectrum Brands Inc.'s bonds continued to slip in the wake of the late-Thursday announcement from the Atlanta-based maker of Rayovac batteries and other consumer products, lowering its financial guidance for the full year.

And Friday the 13th proved to be an evil day indeed for holders of Dura Automotive Systems Inc.'s subordinated bonds, who found out that the bankrupt Rochester Hills, Mich.-based vehicle components manufacturer's reorganization plan completely freezes them out, with not even a penny on the dollar of recovery, which caused those bonds to gyrate wildly at lower levels. However, holders of the company's senior bonds had no cause to suffer from triskaidekaphobia, because the 13th brought them the good news that they will receive a stake in the reorganized company, which pushed those bonds up a point or two.

A high yield syndicate official said that the market continued to regain ground on Friday which it had given up during the latter part of June and early July.

Noting that a certain amount of vigor became apparent in the high yield on Wednesday, and held in on Thursday, the source said that junk continued to feel better on Friday, and said that the CDX index was up ½ point on the day.

Meanwhile in the primary market, four deals were added to the forward calendar.

East Valley Tourist Development Authority and Downstream Development Authority became the second and third project financing deals from gaming firms to make an appearance in recent days.

Earlier in the week Silverton Casino Hotel & Resort launched a $215 million project financing deal.

One sell-side source remarked that deals from the gaming sector may be just the balm that is presently needed by the primary market, which has seen six issuers pull 11 tranches totaling $4.45 billion since June 26.

Aside from the gaming sector Aeroflex Inc. launched an LBO deal and LBI Media, Inc. will begin marketing a debt refinancing transaction.

New gaming deals

Two new project financings from gaming companies climbed aboard the new deal calendar on Friday.

East Valley Tourist Development Authority will begin a roadshow on Monday for its $290 million two-part offering of senior secured notes (B+).

The authority is offering eight-year fixed-rate notes and seven-year floating-rate notes.

Merrill Lynch & Co. is the bookrunner.

Elsewhere the Downstream Development Authority of the Quapaw tribe of Oklahoma will begin a roadshow on Wednesday for its $235 million offering of eight-year senior notes (B-) via left bookrunner Banc of America Securities LLC. Merrill Lynch & Co. is the joint bookrunner.

They join Silverton Casino Hotel & Resort which launched a $215 million offering of eight-year second mortgage notes (B-), also via Banc of America Securities, earlier in the week.

Aeroflex and LBI Media launch deals

A roadshow starts Monday for Aeroflex's $370 million offering of 10-year senior notes.

Goldman Sachs & Co. is the bookrunner for the deal, proceeds from which will be used to help fund the LBO of the New York-based aerospace company by Veritas Capital.

Meanwhile LBI Media will begin a brief roadshow on Monday for its $225 million offering of 10-year senior subordinated notes (B2/CCC) via Credit Suisse, Deutsche Bank Securities and Wachovia Securities.

Proceeds will be used to refinance the Burbank, Calif.-based Spanish language media company's 10 1/8% notes due 2012, to repay bank debt and for general corporate purposes.

Week's issuance below $500 million

With no deals pricing during the Friday session, the July 9 through July 13 week came to a close with only one issuer, Neo-China Group (Holding) Ltd., pricing a dollar-denominated Rule 144A deal.

The Chinese property developer raised $394 million of proceeds by pricing its senior guaranteed fixed rate bonds due 2014 (B1/B+) at 98.50 to yield 9¾%.

At Friday's close the 2007 primary market had turned out $109 billion of issuance in 281 tranches.

However 2007 issuance maintains a substantial lead over that of the record-setting year of 2006.

Through July 13, issuance for 2006 totaled only slightly more than $70 billion in 205 tranches.

The week ahead

A modest forward calendar is in place for the week that commences on Monday.

French real estate developer Groupe Akerys is in the market with a €300 million offering of seven-year senior floating-rate notes, an acquisition financing via BNP Paribas, Calyon Securities and SG Corporate & Investment Banking.

A market source told Prospect News that initial guidance is Euribor plus 325 basis points.

And InterGen Group is expected to price its $1.975 billion equivalent offering of senior secured first-lien notes (Ba3/BB-) to be sold in dollar-, euro- and sterling-denominated tranches.

Merrill Lynch & Co. is the bookrunner.

Playtex bonds push higher

Back in the secondary sphere, Playtex's bonds pushed higher on the news that the company is to be bought for $18.30 per share, or $1.16 billion. Debt assumption brings the total value of the deal to $1.9 billion. The bonds are to be tendered in connection with the transaction.

A trader saw Playtex's 8% notes due 2011 up 1½ points on the session at 104.75 bid, 105.75 offered, while the company's 9 3/8% notes due 2011 were seen ½ point higher at 103 bid, 103.5 offered.

Another trader said the bonds were left bid and looking for offers, with the 8s at 104.5 and the 9 3/8s at 103.125.

Besides its line of sun screens and sun blocks, Playtex make feminine care products and infant feeding products.

Spectrum lower on guidance warning

While Energizer sits securely atop the battery world, smaller rival Spectrum Brands has been struggling with sales downturns in both its signature battery business and its division that makes lawn-care products.

That caused the company to revise its 2007 full-year sales and EBITDA estimates lower, which in turn pushed its bonds down.

A trader saw those notes "quoted a lot Friday," pegging its 7 3/8% notes due 2015 at 75.5 bid, 76.5 offered, up a point on the day with "a huge amount" of the bonds traded - this despite the company's warning Thursday that it expects lower 2007 sales and EBITDA.

He also saw "a huge amount" of Spectrum's 11¼% notes due 2013, which he said closed at 86 bid.

A trader who had seen the 111/4s fall as much as 5 points in the last hour of trading Thursday into the mid-80s in response to the reduced guidance, which was announced late Thursday afternoon, saw the bonds closing Friday at 85 bid, 86 offered, which he called down a point.

Dura junior bonds gyrate lower

Also on the downside, a trader saw Dura's 8 5/8% senior notes due 2012 closing at 73 bid, 74 offered, up 3 points on the session - but also saw the company's subordinated 9% notes due 2009 at a wide 5 bid, 9 offered, which he called a 7 point loss.

At another desk, the bonds were seen having opened around 11 - but then dropped to around a 7-handle level around mid-day after news of the coming reorganization plan hit the tape. From there it was all downhill, with the junior bonds dropping as low as 3.5 cents on the dollar before rebounding modestly off those prices to end in a 6-7 context. Trading was very busy.

Under the terms of the plan, disclosed in a court filing, the senior debt holders would get a stake in the company. Other creditors will get stock in exchange for agreeing to dismiss their claims.

However, the holders of the roughly $561 million of 9% subordinated notes stand to get nothing if the plan is implemented without an amendment.

Movie Gallery moves up

A trader saw Movie Gallery Inc.'s 11% notes due 2013 jump to 28 bid, 29 offered, up from prior levels around 24.5 bid. He said that there was substantial activity in the credit, with "a good amount traded."

Another trader also pegged the bonds at 28 bid, 29 offered. He said that the gain was not due to any specific favorable news out about the troubled Dothan, Ala.-based Number-Two U.S. video rental store chain operator, but was rather just due to "people buying up distressed paper."

Besides the bond rise, he also saw the company's bank debt firmer, with its first-lien debt at 93 bid, 95 offered and its second-lien debt at 74.5 bid, 77.5 offered

A trader saw the Movie Gallery bonds start the day's trading at 25 bid, 26 offered, which he called up 3 points from prior levels, and end the session at 28 bid, 30 offered.

Another possibility is speculation being bandied about in some quarters of the financial media about the valuations that might be seen in the event the company formally undergoes a formal restructuring, with the first-lien holders expected to be made whole and the second-lien creditors and the bondholders fighting over whatever crumbs are left. The unsecured bondholder creditors, so the theory goes, might be able to force a somewhat larger-than-expected recovery at the expense of the second-lien holders, given the much larger size of the company's unsecured bond debt versus the second-lien piece - about $325 million in bonds versus just $175 million of second-lien.

Hovnanian gains on Buffet buzz

The news that one of the world's richest men - and one known as "the Oracle of Omaha" for his savvy stock picks - apparently likes Hovnanian Enterprises and is rumored to be interested in investing in the company was likewise hailed as good news.

A trader pegged the company's 8 7/8% notes due 2012 up 3 points to 92.5 bid, 93.4

Another market source saw its 6 3/8% notes due 2014 up 1½ points at 86.5

The rumors of the coming Buffet buy remained just that - rumors - in the absence of any official confirmation or denial from Buffet on Friday.

Tembec extends gains

Elsewhere, a trader called Tembec Inc.'s bonds up about a point, continuing the firmer trend seen Thursday in the Montreal-based forest products company's bonds, which is perhaps connected with the Canadian dollar backing away over the course of this week from the 30-year highs against the U.S. greenback which it had hit at the start of the week.

He called Tembec's 8 5/8% notes due 2009 57 bid, 58 offered, which he called up a point on the day, while its 7¾% notes due 2012 were also seen a point better at 50.5 bid, 51.5 offered.

Canada's dollar has been trading at about 95 U.S. cents, its highest level in 30 years, this past week, although Friday's levels were notably below the levels seen the prior Monday. The strong loonie increases the costs of products such as lumber and paper sold by Tembec and other Canadian forest product companies in the U.S. and other foreign markets.

Sea Containers becalmed

In other parts of the distressed world, a trader said that "there really was no activity" in Sea Containers Ltd.'s bonds, which had fallen about 1 point across the board, although there was a lack of fresh news out on the bankrupt Bermuda-based maritime and railroad transportation company.

"Whatever happened [Thursday], that was it for them." Thursday's dealings left the company's 10¾% bonds that were to have come due last year at 91 bid, 93 offered, its 7 7/8% notes due 2008 at 87 bid, 89 offered, while its 10½% notes due 2012 ended at 90 bid, 92 offered.

A trader saw Technical Olympic USA's bonds "rallying back - they got beat up" earlier in the week on the problems of the housing industry, but "they're slowly coming back, and have stabilized," with its 10 3/8% notes due 2012 at 72.5 bid, 73.5 offered - "not a lot of change from [Thursday]," but he noted that in that prior session, the bonds had rebounded about 3 points on the day from recent lows.

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